July 2011 | Sponsored | Thought Leaders

The Perfect Time to Optimize Labor Management

Tags: Logistics I.T., Labor Management

Malysa O’Connor is Director, Logistics Practice Group, Kronos. 800-225-1561

Q: A confluence of issues related to rising fuel costs, compliance challenges, and lost capacity is currently impacting the logistics industry. Why is now the perfect time to optimize labor management?

O’Connor: Driver shortages, rising fuel prices, and legislative changes related to Hours-of-Service (HOS) and Comprehensive Safety Analysis (CSA) are increasing operating costs and will potentially further decrease capacity. To maintain a competitive edge, it is important to have an accurate accounting of costs by customer, order, or task, and to gain real-time visibility into labor performance. A comprehensive labor management solution that automates processes such as hiring, time and attendance, and scheduling can help control costs, minimize compliance risk, and improve productivity.

Consider the cost of hiring a replacement driver in terms of lost capacity and direct hiring costs, for example. With advanced hiring solutions, you can automatically and accurately source, select, and on-board so you can significantly reduce the time it takes to hire, as well as improve your workforce quality. Additionally, accuracy in time tracking and scheduling can help control labor costs by controlling unnecessary overtime and shrinking payroll inflation. You can also automate all safety and attendance policies, and use automated certification tracking to ensure employees have the correct, up-to-date skills and certifications.

Finally, labor management solutions support lean initiatives so you can increase the capacity of your existing workforce and encourage pay-for-performance initiatives.

Q: What are the pitfalls of lacking visibility into supply chain labor?

O’Connor: Bureau of Labor statistics state that two-thirds of logistics workers are drivers or material handlers, roles that directly impact quality and service. Typically, logistics organizations have great visibility into the movement of goods throughout the warehouse or channel. But two key visibility challenges can affect both service levels and profit margins: labor costs and labor performance.

Labor costs exceed 50 percent of a typical operating budget. Unseen and uncontrollable labor costs can have a significant impact on profit margins. Idle or underutilized workers create non-value labor expenses, and for a $10-million payroll, just five percent in non-productive time wastes $500,000 annually. If you can’t understand how paid time is spent – for which tasks, when, and by whom – then you can’t see or control your true labor costs and the causes behind margin variances.

Visibility empowers you to respond effectively to unexpected situations affecting labor performance, such as sudden spikes in demand, unanticipated orders, and labor fluctuations. Labor management tools provide real-time dashboards so you can match people against the orders or shipments you are fulfilling, identify which orders are under- or over-staffed, and reallocate labor instantly.